Weak China data send European stocks to one-week low

France’s CAC 40 rises after Iliad and Bouygues rally on deal news

LONDON (MarketWatch) — Europe’s benchmark stock index closed at the lowest level in a week on Monday after surprisingly weak Chinese export data spurred concerns about the global economy and weighed especially on the mining sector.

The Stoxx Europe 600 index
SXXP, +0.03%
dropped 0.5% to close at 331.40, building on a 1.3% loss from Friday.

Europe's week ahead: Question time for Carney

(3:46)

Bank of England Gov. Mark Carney goes before U.K. members of parliament at a treasury select committee next week and can expect questions on both the bank’s latest inflation report and the current forex probe.

Among notable movers in Monday’s trade, shares of Iliad SA
ILD, +0.37%
rallied 11% after the French telecom firm said over the weekend it was in exclusive talks to buy Bouygues SA’s
EN, -0.89%
mobile-network infrastructure if Bouygues’s proposed bid to take over mobile operator SFR gets through. Iliad also posted a 40% rise in profit for last year. Shares of Bouygues rose 8.7%.

The moves boosted the French CAC 40 index
PX1, +0.72%
which gained 0.1% to 4,370.84. Other major national indexes, however, closed lower, with Germany’s DAX 30 index
DAX, +0.46%
down 0.9% to 9,265.50 and the U.K.’s FTSE 100 index
UKX, +0.41%off 0.4% at 6,689.45.

The mining sector weighed on the London index after disappointing Chinese trade data. Numbers out over the weekend showed exports unexpectedly fell 18.1% in February from a year earlier, a deterioration after January’s 10.6% rise and worse than the 5% expansion forecast by economists. Chinese exports are seen as a gauge of global demand, and the weak data for February signaled a wider slowdown in appetite for goods.

James Ashley, chief European Economist at RBC Capital Markets, explained that the Chinese data also are important to European markets, as during the crisis China remained on the of strongest points and worked as a stimulus to the international economy.

“So if, and it’s really if, we see the Chinese economy falter it would not just have implications for Asia, but for the global economy,” he said.

He cautioned however, that the export numbers could have been distorted by one-off factors such as the Lunar New Year and the exceptionally cold weather in the U.S., so investors shouldn’t over-interpret just one set of data.

Heavyweight Vodafone Group PLC
VOD, +0.33%VOD, +0.03%
lost 3.6% after Reuters late Friday reported that the telecom firm has reached a preliminary deal to buy Spanish cable group Ono after raising its initial offer. In February, Ono rejected an earlier bid from Vodafone and decided to continue with a planned initial public offering that would value the company at 7 billion euros ($9.7 billion), including debt. A representative from Vodafone wasn’t immediately available to comment.

On a more upbeat note in London, Rolls-Royce Holdings PLC
RR., +5.94%
picked up 1.7% after Daimler AG
DAI, +1.05%
said on Friday it plans to sell its 50% stake in Rolls-Royce Power Systems Holding to Rolls-Royce.

Also getting market attention, U.S. Federal Reserve Bank of Philadelphia President Charles Plosser told a panel in Paris that the U.S. central bank may have to speed up the pace of tapering its bond purchases to take into account the improving economy. Plosser, who is a voting member of the Federal Reserve’s policy committee, said that reducing the asset purchases is a step in the right direction, “but the pace may leave us well behind the curve if the economy continues to play out according to the FOMC forecasts”.

European Central Bank official Christian Noyer was further in the spotlight on Monday, warning that low inflation in the euro zone may hamper the region’s adjustment strategies, which are necessary for some member countries to become more competitive. Several months of low inflation have recently sparked fears of deflation in the currency bloc, with economists speculation the ECB would either cut rates or otherwise ease the economy at its policy meeting last week. The bank, however, offered neither rate cuts, nor looser monetary policy in a signal that it is happy with where market rates are right now, Ashley from RBC Capital Markets said.

He explained that he now expects no further cuts to the ECB interest rates as long as market rates continue to be “well behaved.”

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